TITLE: The equity markets and the flows generated by currency carry trades
KEYWORDS: markets, currency pairs, carry trades, correlation, regression analysis
ABSTRACT: Carry trade strategies based on major currency pairs gained momentum between 1995 and 2008, a period when financing for investments on the capital markets was difficult in developed countries that held high key interest rates. Japan was the first economic power that lowered the interest rate below 1% in 1995 and generated an important circuit on the USDJPY exchange rate. We plan to empirically test the influence of the largest currency carry trade channel, the USDJPY, on the US equity market and to highlight the importance of major carry trade circuits for anticipating movements in equity markets.
